Residential real-estate prices dropped in November by the most in a year, signaling housing has yet to join the U.S. rebound.
The S&P/Case-Shiller index of home values in 20 cities fell 1.6 percent from November the prior year, the biggest 12-month decrease since December 2009, the group said today in New York. The decline matched the median forecast of economists surveyed by Bloomberg News.
Mounting foreclosures will probably throw more properties on the market this year, further depressing prices, homeowners’ equity and construction. The lack of a sustained housing rebound and unemployment above 9 percent are among reasons the Federal Reserve may announce this week it’ll complete a second round of stimulus that will pump $600 billion into the economy by June.
“We’re having what I’d call a mini double-dip in home prices,” Michelle Meyer, senior U.S. economist with Bank of America Merrill Lynch Global Research in New York, said before the report. “Prices will remain pretty weak through the first half of the year. With excess supply on the market, it is still very much a buyers’ market.”
The median forecast was based on a survey of 26 economists. Estimates ranged from declines of 2.1 percent to 0.1 percent. Year-over-year records began in 2001. The decrease followed a 0.8 percent year-over-year drop in October.
Prices fell 0.5 percent in November from the prior month after adjusting for seasonal variations following a 1 percent October decrease. Unadjusted prices dropped 1 percent from the prior month as 19 of 20 cities showed declines.
The year-over-year gauge provides better indications of trends in prices, the group has said. The panel includes Karl Case and Robert Shiller, the economists who created the index.
The Case-Shiller gauge is based on a three-month average, which means the November data was influenced by transactions in October and September.
Sixteen of the 20 cities in the index showed a year-over- year decline, led by a 7.9 percent drop in Atlanta. In November, prices in eight markets dropped to fresh lows from their 2006, 2007 peaks.
“With these numbers more analysts will be calling for a double-dip in home prices,” David Blitzer, chairman of the index committee at S&P, said in a statement. A double-dip would be reached when the 20-city index sets a new post-peak low, which may happen in the first half of this year, said Blitzer.
Washington showed the biggest year-over-year increase, with prices rising 3.5 percent in the 12 months to November.
The industry is trying to regain its footing after demand plunged following the expiration of a buyer tax incentive of as much as $8,000. Sales slumped in mid-2010, causing prices to slide and builders to pull back.
For 2011, most Districts anticipate “continued weak conditions” in residential real estate, the Fed said Jan. 12 in its Beige Book report, based on anecdotal information. The New York, Atlanta, Chicago, and San Francisco areas mentioned “distressed properties placing downward pressure on prices,” it said.
Fed officials, starting a two-day policy meeting today, may push ahead with the planned securities purchases even amid signs the recovery is strengthening. The world’s largest economy probably grew at a 3.5 percent annual rate in the fourth quarter, up from a 2.6 percent pace in the previous three months, according to the median forecast of economists surveyed by Bloomberg News before a report later this week.
Industry projections reinforce the concern about housing. The number of homes receiving a foreclosure filing will climb about 20 percent in 2011, reaching a peak for the housing crisis, said RealtyTrac Inc., an Irvine, California-based data seller.
Home values may drop as much as 11 percent through the first quarter of 2012, which would put them 36 percent below their 2006 peak, according to a Dec. 8 Morgan Stanley report.
Developers remain cautious. Housing starts fell in December to the lowest level since October 2009, Commerce Department figures showed. Miami-based Lennar Corp., the third-largest U.S. homebuilder by revenue, is among companies bracing for a slow rebound.
It’ll be a “long and bumpy” housing recovery, Stuart Miller, chief executive officer, said on a Jan. 11 conference call with analysts. “Shadow inventory and foreclosures will continue to impact individual markets on the supply side, while the pace of recovery in the job market will influence consumer confidence and demand.”
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